Though the baht is weakening, the currency movement is in line with regional currency depreciation because of external factors prompting foreign investors to shift capital from emerging markets, says a senior Bank of Thailand official.
Chantavarn Sucharitakul, the assistant governor overseeing the financial markets operations group, said foreign investors had priced in domestic political factors, so the outflow is mainly due to the US Federal Reserve’s additional tapering of its monetary stimulus and political tensions in the Crimean peninsula.
Since the Fed’s recent announcement of its asset purchase pullback to US$55 billion from $85 billion, signs showing a faster recovery than expected in the US are driving the weakening trend.
The baht has been stable for the most part and its minimal movement reflects recent news developments both internally and externally, said Mrs Chantavarn.
Federal Reserve chairwoman Janet Yellen said the Fed’s monetary stimulus could end this fall, suggesting the US central bank could begin raising its interest rate six months after it halts its monthly bond-buying measure.
Foreign investors' move away from the Thai bourse has been in line with the movement of the SET, suggesting foreign investors are neither overweight nor underweight in their equities, said Mrs Chantavarn.
She said it is difficult to assess the outlook of the baht movement and capital flows as several factors are involved and news reports colour foreign investors' perceptions.
The financial market should be less volatile since pricing in the Fed’s continued tapering, she added.